The Digital Economy
Summary
Tapscott's 1995 book was among the first to argue that networked information technology would reorganise business rather than merely make existing operations more efficient.
His twelve themes included: knowledge as the primary economic input; digitisation of information changing what can be moved and reproduced at no cost; virtualisation, in which physical things and organisations are replaced by their informational equivalents; molecularisation, meaning the breaking of large organisations into small units that can be recombined; integration and internetworking, in which value is created by networks of firms rather than by individual ones; disintermediation, removing layers between producer and consumer; convergence of computing, communications and content; innovation as the primary source of value; prosumption, in which consumers participate in producing what they consume; immediacy, meaning real-time operation; globalisation; and discordance, meaning the social conflicts the transition would produce.
Several were correct in direction. Disintermediation, convergence, network-based value creation and consumer participation in production all occurred substantially as described. The predictions about timing were optimistic, the specific companies and technologies named are largely gone, and the treatment of the transition's social costs is brief despite discordance being listed as a theme.
The book is a period document written at the beginning of commercial internet adoption. It has no analytical framework beyond the themes and no evidence beyond example. Shapiro and Varian's Information Rules is the analytically serious book on the same economics.
Key takeaways 7
- Networked information technology reorganises business rather than merely making existing operations more efficient.
- Digitising information makes it reproducible and transportable at no cost, which changes the economics of every business built on distributing it.
- Large organisations break into small units that can be recombined, which changes the firm's boundaries and what must be owned.
- Value is created by networks of firms rather than by individual ones, which makes the relevant competitive unit the network.
- Disintermediation removes layers between producer and consumer wherever those layers exist only to move information.
- Consumers participate in producing what they consume, which changes the relationship between the firm and its market.
- The book is a 1995 period document, and Shapiro and Varian's Information Rules is the analytically serious treatment of the same economics.
Who should read it
Readers interested in an early statement of digital business themes, with Information Rules as the rigorous source.
About Don Tapscott
Canadian business author and consultant, co-founder of the Blockchain Research Institute, who wrote The Digital Economy and Wikinomics.
The Digital Economy set out early how networks would redraw firm boundaries, and Wikinomics documented mass collaboration - open source, peer production, crowdsourced research - as a working production model rather than a curiosity. Blockchain Revolution extends the argument to distributed ledgers and their business applications.
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